Weak link

The U.S. has accused the country’s third-largest bank of busting North Korean sanctions. This triggered outflows and an ECB payment freeze. Euro members Malta and Cyprus have also faced criticism for poor oversight. The bloc needs to rethink the policing of its weakest links.

Context News

The U.S. Treasury’s Financial Crimes Enforcement Network on Feb. 13 proposed shutting ABLV bank, Latvia’s third-largest lender, out of the U.S. financial system. It accused the bank of facilitating widespread money laundering and illicit financing, including to banned North Korean entities involved in the country’s weapons programme.

The U.S. announcement triggered deposit withdrawals of around 600 million euros, or 22 percent of total deposits, ABLV said on Feb. 19. This prompted the European Central Bank to temporarily suspend the lender’s ability to process some payments.

ABLV has rejected the U.S. claims that it participated in illegal activities.

Two other Latvian banks were fined last year for allowing clients to violate European Union and United Nations sanctions on North Korea. The fines followed a U.S. investigation. Separately, Latvia’s anti-corruption agency briefly detained Ilmars Rimsevics, the long-standing governor of the country’s central bank, over bribery allegations.

Rimsevics, who represents Latvia on the European Central Bank’s Governing Council, is suspected of demanding a bribe of no less than 100,000 euros, the head of Latvia’s anti-corruption authority told reporters at a news conference on Feb. 19.

Rimsevics denied any wrongdoing, saying he is the target of a smear campaign.